256 | 2024 Cal-Peculiarities ©2024 Seyfarth Shaw LLP www.seyfarth.com 7.21 Broadened Definition of Employer? 7.21.1 Joint employers In 2010, in Martinez v. Combs, the California Supreme Court held that the Wage Orders endorse a broad definition of “employer” that extends beyond the definition of “employer” ordinarily used in interpreting federal statutes (i.e., the common law definition). The California Wage Order definition of employer extends to anyone who (1) exercises control over wages, hours, or working conditions, (2) suffers or permits a worker to work, or (3) engages a worker to work, thereby creating a common law relationship.483 Martinez reaffirmed, however, that this definition of employer does not impose liability on individual corporate agents who were acting within the scope of their agency, even if this would leave workers without a remedy because their primary employer has gone bankrupt. In the case before it, Martinez found that merchants who purchased produce from a strawberry farmer were not the “employers” of the farmer’s agricultural workers where only the farmer had the power to hire and fire the workers, to set their wages and hours, and to tell them when and where to report to work. In 2012, the Court of Appeal, in Patterson v. Domino’s Pizza, further promoted a broad notion of employment liability. At issue was whether a pizza franchisor could be held liable for torts and FEHA violations perpetrated against a teenage pizza store employee by the manager of a pizza store franchisee.484 The Court of Appeal held that liability for the franchisor was possible, on the basis of a franchise contract that gave the franchisor extensive control over the pizza store franchise’s local operations, and on the basis of extra-contractual evidence suggesting that the franchisor exercised extensive local management control over the franchisee in areas including employee conduct and discipline. In 2014, the California Supreme Court reversed, albeit by a 4-3 vote, holding that uniform marketing and operational plans do not automatically make the franchisor liable for the actions of the franchisee’s supervisors. Rather, to be considered an employer, the franchisor would have to retain or assume a “general right of control” over the business.485 But the Court of Appeal has continued efforts to expand the scope of employer liability. In 2014, the same Court of Appeal justice who wrote the opinion in Patterson v. Domino’s Pizza wrote a similarly expansive decision in Castaneda v. Ensign Group, Inc.486 A nursing assistant, seeking unpaid minimum and overtime wages earned at a rehabilitation care center, sued Ensign Group, a holding company that owned the care center. The trial court granted summary judgment to Ensign because Ensign did not manage the care center. But the Court of Appeal reversed, holding that a parent corporation could be liable for a wholly owned subsidiary’s wage and hour violations, even if the parent corporation did not directly hire, fire, or supervise the employees in question. The Court of Appeal opined that where the parent corporation exercised structural and managerial control over the subsidiary, and thus could have ensured that the subsidiary’s practices complied with California labor law, there is a basis to hold them liable for the subsidiary’s violations. The Court of Appeal, in reference to Martinez v. Combs, concluded that there is a potential basis for liability where a parent company fails “to perform the duty of seeing to it that the prohibited condition does not exist.”487 To support its conclusion, the Court of Appeal cited evidence that Ensign required care center employees to follow Ensign “core values,” to use Ensign “forms and templates in the course of doing their jobs,” and to use particular computer and billing and operational systems.488 Nonetheless, in a 2019 wage and hour case, the Court of Appeal rebuffed efforts to impose joint employer status on the owner of a premises where another company employed a worker.489 The Court of Appeal affirmed summary judgment for a gas station owner that was sued for unpaid wages, failure to provide meal breaks, and failure to authorize and permit rest breaks by a gas station manager who worked for the owner’s operating company. The Court of Appeal held that the gas station owner was not a joint employer because the operating company alone made decisions on recruiting, interviewing, hiring, disciplining, promoting, and discharging employees, had sole control over payroll functions, and had its own employee handbook and set its own meal and
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